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Global CIO: IBM Top Product Exec Discusses Strategy, Systems, & Oracle

IBM's head of Software and Systems Steve Mills describes customer priorities, optimized systems, and Oracle's "bait-and-switch" philosophy.
5) How IBM Differentiates Itself in the Market. "The market has always been competitive. You see lots of acquisitions, so things don't perhaps go away so much as they morph: they come under a new corporate banner, but they're still out there. It is a very competitive market, and many of our larger clients retain significant staffs that evaluate the products one by one. We're engaged in thousands of proof-of-technology, proof-of-concepts, benchmarks and bakeoffs, and that's just an everyday phenomenon of the marketplace and being able to demonstrate that you've got a better solution than your competitors. We take a great deal of pride in functional richness, and we love benchmarks and scalability benchmarks. We think the customer—frankly, if I were on the other side of the table, I'd be challenging all of my vendors to prove it—it's easy to come and tell me what your product can do, but instead, show me you can do it. Prove it. I'm not gonna buy without proof—I'm not buying a commodity, I'm buying a fairly sophisticated thing, and frankly I'm gonna spend more money putting it into my business than I am in buying it from you. What I'm giving you is a fifth of a tenth of what I'm actually gonna spend overall and I have to get value for the product so I have to think about that overall value and not just what I pay you, and therefore I've got to to look at whether this really works for me. And, you know, tech vendors in this industry are, uh, interesting companies to compete with—there are a lot of personalities out there and some are more challenging than others, and some would hope the customers don't benchmark because they prefer not to have their weaknesses exposed. But we're very benchmark-centric, and very 'prove-it' centric, and we think we compete very effectively that way—we think it's one of our advantages. And we think it provides us with a unique opportunity to expose our talent to our customers. We have a very outbound-laboratory model—I've bought 100 companies, and no company that I've bought and no company I could name has a more outbound-laboratory model than we do. We deploy our technical talent as a true strategic advantage for IBM, not just because of their inventiveness but because of the extraordinary value they deliver every day to customers."

6) Oracle's Claims, and Oracle's Approaches. I asked Mills for his opinion on an idea raised recently by Oracle president Charles Phillips, who said that CIOs can make many of their IT problems disappear if they would just agree to buy their entire stack from Oracle. And I don't think Mills buys that concept: "We have the world's largest Oracle integration practice in IBM Global Business Services, so it's not reflected in the amount of money that people spend in integrating Oracle products, which is many times the cost of the purchase of the Oracle products. The integration cost that the customer incurs—both in-house and their integrators—is many times that of the Oracle products, and there's been no diminishing of that labor requirement. And so although it's an interesting assertion, if you qualify the question, you're certain to get the answer you want. If everything worked together perfectly, would you buy from one vendor? Well, that's a big but, and it's one of those highly qualified questions where the customer is clearly now being baited into saying, 'Well, of course! If you could solve that problem for me—if you could make all this stuff work together, and if it came to me that way, and you significantly reduced my cost, then you have my attention.' So it's one of those fundamental truths—but of course it's a function of how you phrase the question in terms of the answer you'll get.

"Customers will also tell you that they don't want to give Oracle pricing power—they don't view Oracle as a friendly company to do business with. They view their contracting and their licensing terms and their charging mechanisms and their up-charging and their embedded-feature charging, which is not always visible when you buy a product, and their maintenance policies and so on, all to be fairly onerous. For all of the rhetoric about how 'We'll make it simple for you'—and we'll certainly all hear a lot about that at the upcoming Oracle conference [Oracle Open World, Sept. 19-24]—there'll be a huge flow of testosterone coming from the stage as there always is from Oracle about how spectacular they are and all the great things that they will do in the future and so on and so on. But Fusion has yet to arrive—they use it as a brand, but nothing has fused; the traditional Oracle ERP code has not fused with the PeopleSoft code, has not fused with the JD Edwards code or the Siebel code or the Retek code, etc. Look at all the apps companies they've bought: they've not fused anything. The complexities are still there, and the challenges of dealing with all the different products and deploying them are still there—so I think this is all about Oracle presenting the image that Oracle wants to present, as opposed to the investments and actions Oracle is actually taking.

"So yes—customers want faster time to value. They find things that give them value quickly are appealing. But they're not going to sacrifice the business goals and objectives they have for what may be simple to deploy but ultimately doesn't meet their requirements, and doesn't satisfy what the business need is at the time. Those tradeoffs have to be taken into consideration."

Yes indeed, Steve Mills has seen a lot in his 37 years at IBM, that experience clearly inspires him to take the long view rather than getting overly caught up in the latest trends and infatuated with the latest fashions. But at the same time, IBM under Mills is ratcheting up—dramatically, I would say—it's pace and scale of new-product introductions and acquisitions and publicly feisty competitiveness.

So don't be lulled into a nap by Mills' sweeping historical perspectives, because while those certainly shape the company's long-term strategy, in the short term IBM has become an aggressive predator for its competitors and a source of ongoing innovation for its customers. And that's a long-term/short-term combination that very few companies will be able to match.

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GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].